Thursday’s session on October 15 illustrated the dilemma facing the US Federal Reserve (Fed). In the morning, the dollar was falling on concerns about the debt of artificial intelligence (AI) players. A few hours later, September producer prices (PPI) that came in well above expectations allowed it to erase its losses.

The dollar falls in the morning

According to an AWP/AFP dispatch carried by Allnews, at around 10:55 on Thursday, the greenback was down 0.53% against the euro, at 1.1217 dollars per euro, and 0.49% against the pound sterling, at 1.3259 dollars per pound.

The day before, however, the dollar had risen. Consumer prices (CPI) released on Wednesday rose 3.7% year-on-year in September in the United States, more than the 3.6% expected and after 3.4% in August. That figure had revived the prospect of another Fed rate hike in October and on Wednesday lifted the dollar to its highest level against the euro since May 2025.

The move reversed within a few hours. This reversal “appears to have been triggered by growing concerns about the AI sector’s debt,” says Chris Turner, an analyst at ING, quoted by Allnews. Shares of CoreWeave, a US company that builds data centers optimized for AI in order to rent out their computing power, plunged 16% on Wall Street on Wednesday, on concerns about its level of debt and the cost of its borrowing. If these difficulties were to weigh on US growth, the Fed could be deterred from raising rates, the dispatch explains. Thus, “instead of strengthening as a safe haven, the dollar is weakening as” bets rise on a “more accommodative” Fed, Chris Turner sums up.

A PPI of 6.3% year-on-year

The other signal came from the statistics. According to Journal du Coin, citing the Bureau of Labor Statistics, the producer price index rose 1.3% month-on-month in September and 6.3% year-on-year. Economists had expected 0.5% and 5.3% respectively. The monthly increase is the largest since March 2022 and the annual rate the highest since December 2022.

The breakdown shows the weight of energy. Prices of final demand goods rose 2.6% in a month, the largest increase since the series began in December 2009. Energy, up 10.8%, accounts for more than 80% of this move; wholesale gasoline jumped 20.3%. Further upstream, crude oil climbed 28.3% over the month and unprocessed energy 22.2%. Services rose 0.8%, driven by transportation and warehousing (+3.4%).

Excluding food, energy and trade margins, core PPI rose 0.5% month-on-month and 5% year-on-year. Journal du Coin sees this as a sign that the oil shock is beginning to spread to other prices, a reading in line with the remarks of Jeff Schmid, of the Kansas City Fed, for whom inflation “is not just an energy problem.” This is an interpretation: the PPI often foreshadows the CPI of the following months, but there is no guarantee that the pass-through will happen at the same pace.

The Fed rate ahead of October 28

The Fed raised its rates from 3.75% to 4% in September, under the leadership of Kevin Warsh, and sixteen of the eighteen members of its committee then projected a further hike before the end of the year, Journal du Coin recalls. After Wednesday’s CPI, the probability of a hike on October 28, as measured by the CME FedWatch tool, rose from around 22% to 37%, with a peak above 50% during the session. The outlet considers that this scenario is becoming the central one after the PPI, without however publishing an updated probability after Thursday’s figures.

On the foreign exchange market, the dollar erased its morning losses after the release of the PPI, at 102.2 on the DXY index. Fears over AI debt argue for caution, producer price inflation for another tightening: the two sources do not make it possible to say which of these signals will prevail. The next statistical milestone is the PCE index, due on October 27, the day before the decision. The October PPI will not be released until November 13.

And the franc?

Neither of the two sources consulted mentions the franc’s exchange rate or its effects on the Swiss economy. In general terms, movements in the dollar against the major currencies feed through to the exchange rate conditions of Swiss companies that export to the United States or invoice in dollars; these data do not, however, make it possible to assess the extent. A dip in the dollar over a morning, erased in the afternoon, is not enough to establish a trend.

Sources

  • Allnews (AWP/AFP): “The dollar falls back on fears over the AI sector’s debt”
  • Journal du Coin: “Inflation in the United States: producer prices soar 6.3%, the Fed has no more excuses”